Bullion is trading higher this morning following the U.S. Department of Labor’s  release of March non-farm payrolls data. The U.S. added only 88,000 jobs last month. The consensus was for an addition of approximately 190,000 jobs.

Needless to say, this report was a huge disappointment. The jobless rate did down tick to 7.6%, although this is simply due to the fact that there are just fewer people actually looking for work at this point.

Following the data, stock market futures plunged and gold jumped higher. In fact, after meandering around the $1550 level for most of the night and early morning, gold futures for June delivery jumped from the $1553/54 area all the way to print a high of $1576.  Although prices have  eased since the initial pop, gold is still trading moderately higher at $1567.20 as of this writing.

This weak jobs report will force shorts in the market to think twice. In fact it is quite likely that many shorts covered this morning following the data. In addition, bargain hunters at the $1550 level are helping to drive prices up.The outside markets today are mixed with crude oil trading down along with equities. Weakness in the dollar is likely contributing to gold’s gains today as well.

Looking at the bigger picture this report likely forces the fed’s hand to keep the stimulus flowing for the foreseeable future. It is very difficult to imagine the Fed being in a hurry to start tightening at this point given the uncertainty surrounding the labor market.

Although the stock market loves stimulus , even with ongoing bond purchases by the Fed one has to wonder if this will initiate the much anticipated correction in equities that so many have been calling for for some time now.

Should that prove to be the case, gold’s appeal as a perceived safe-haven may be reignited in a major way. It is important to remember that a lot investors have bailed on gold recently, and there is still likely a very large short presence in the market.

Should the situation with North Korea escalate, or should another banking  issue arise in Cyprus or elsewhere, gold could stage a massive rally on short-covering alone. These rallies can be extremely powerful and often happen when least expected. In addition to headline risk, the fact that the Fed is likely to stand pat now is bullish for bullion and bearish for the dollar.

Gold has a lot of hurdles to clear to pave the way for strong upside. The fact remains however, that unless gold breaches this key support on the downside it is still stuck in a range from $1550-$1800 until, proven otherwise.